Global HR: Vital Issues Remain Unsolved as World Reacts to Trump Administration's "America First" Policy

January 05, 2018

HR Policy’s global allies look to face an eventful 2018 as turmoil and disruptive trends continue to roll through many areas of the globe.  Their reports follow, with Tom Hayes of BEERG making heads and tails of Europe, Steve Gilbert of LAMERG sorting out Latin America, and Amy Lau of APERG untangling Asia-Pacific.  

LAMERG Report on Latin America from Steven Gilbert  The year ahead promises more change and transition, and the course for potential opportunity and conflict is clear.
  • Brazil  Brazil’s legislature has ratified a package of broad reforms, and the country’s employers are beginning to test the practical implications of additional flexibility in hours, employment, union status and dues, and dispute resolution, among others.  We will be exploring these topics at our upcoming regional meeting in Sao Paolo in March.
  • Mexico  Mexico is very actively pursuing an EU trade agreement as a pre-emptive step to protect their interests from potential NAFTA changes.  They are still committed to new regulations, which embed the ILO Conventions related to Freedom of Association and the Right to Organize and Collectively Bargain.  The basic obligation was part of a constitutional change announced early in 2017 and the final implementing language is expected in February.  Employers are taking a very careful approach until the final direction is announced, and there is no indication whether the existing relationships between companies and unions will be preserved, phased out, or eliminated in the new structure.
  • Chile  Chile returned former President Sebastián Piñera to office in an election which has been interpreted as a rejection of incumbent President Bachelet’s leftward move.  It is unclear if the election will provide a sufficiently broad conservative mandate to reverse the recent labor law changes which dramatically empowered unions and impeded the ability of employers to develop contingencies for work stoppages as well as maintaining different wage and benefit programs for various operating units.
  • Argentina  Change is also in the air in Argentina, with President Macri’s alliance performing extremely well in the October elections.  They have promised a continuing push to reform labor and tax laws and publicly announced a potential reduction in labor costs of 25 percent through restructured social and other expenses.  The expected street protests have been present, although were less disruptive than might have been forecast.
We are planning for a very provocative and full agenda for our main members’ meeting in Miami in May, and look forward to broad participation from the impacted community.  Registration can be accomplished on the site for those who are interested.
APERG Report on Asia-Pacific from Amy Lau  Despite unconventional developments emerging in 2017, including various leadership changes around the world, Brexit-related uncertainties in Europe, and the North Korean nuclear threat, consensus among economists points to a stronger global economy in 2018.  The growth experienced in the Asia-Pacific region in the past 12 months is also expected to continue, with regional output projected to grow by 5.5 percent in 2018, mainly driven by strong domestic consumption and foreign direct investment in both ICT (Information & Communication Technology) opportunities and low-cost manufacturing.
  • Human Capital Challenges  Given the growth opportunities in the region, employers can expect increasing pressure in attracting and retaining the right talent while containing operating costs, especially in countries with strong domestic consumption such as India, Indonesia, and the Philippines.  Human resources practitioners need to be prepared once again for inflationary pressure and wage hikes, especially in the first 9 months of 2018 and until the central banks of various governments address the inflation issue with interest rate adjustments and other fiscal policy changes.  In addition, the region continues to face serious longer-term challenges such as aging workforces in most countries (excepting Indonesia, the Philippines and Thailand) and the need to improve productivity.  We have seen efforts in exploring alternative talent pools to address the former and much investment in digitization and automation for the latter. 
  • Sexual Harassment Policies With the “#MeToo” movement spreading virally since October 2017 across industries and geographies, enterprises operating in Asia should have plans in place for 2018 to focus on educating employees about sexual harassment at the workplace and be ready to handle such grievances efficiently and effectively. 
  • Intra-regional Reliance In the past, growth of the Asian economy relied on foreign direct investment (FDI) coming mostly from western economies.  However, technological development, human resource development, and an accumulation of capital in Asia have enabled advanced economies in the region to invest and set up production in neighboring countries.  Accordingly, the share of intra-regional FDI has risen from 36 percent in 2006–2009 to an average of 52 percent since 2010, primarily driven by East Asia.  This pattern suggests that Asia is becoming more integrated and self-reliant, with Japan being the dominant source of investment and China the most popular host country.  With the Trump administration taking an “America first” approach to policy, signaled by exiting the Paris Climate Agreement and Trans-Pacific Partnership, Asian countries have resolved to address intra-regional issues without the U.S.  Multinational enterprises getting involved in government relations and deals in Asia will have to be prepared for a modus operandi that requires a deeper understanding of Asian values and cultures to be successful. 
  • China  The region’s largest economy rebounded in 2017, reflecting a relaxing of domestic conditions, fiscal policy, and financial conditions, as well as a supportive external environment.  While the growth rate of China is expected to slow down from the pre-2015 era, the government has demonstrated continued efforts to keep foreign investors happy.  Apart from the numerous signals sent since April 2016 to reduce labor costs and make employment more flexible, provincial governments have also implemented a ‘labor relations early warning system’ whereby employers can seek intervention from government departments before employee voices are amplified through strikes or protests.  This effort has contributed to a significant decrease in industrial actions recorded by the China Labor Bulletin, dropping over the course of one year from 2,601 incidents to 1,218 in 2017.
  • India  Despite below-expectations economic performance in the past 12 months due to disruptions caused by demonetization in November 2016 and the recent roll-out of the goods and services tax, analysts remain bullish on India’s long-term growth, especially after announcement of the attendance of India’s Prime Minister Modi at the upcoming World Economic Forum scheduled for January 2018.  Expectation is that he will deliver a keynote address like President Xi Jinping of China did a year ago.  While India has been identified as an R&D hub by many global businesses, poor infrastructure and bad air quality in the Delhi region threaten its continued growth.
  • Rest of Asia  The rest of Asia can be categorized as follows:
  • Export-led economies that benefit from strong global trade growth where high inflation can be expected.  Korea, Thailand and Vietnam fall into such a category and companies operating in these countries need to be prepared to address issues related to the inflationary pressures. 
  • Domestic-growth economies, like Indonesia and the Philippines, where the population is young with potential for high growth, but mixed success has been seen in implementing structural reforms.  Companies operating in these countries will face challenges of building a talent pipeline and retaining such talent.
  • The Philippines and Vietnam are expected to lead growth among the ASEAN countries while Cambodia, Laos and Myanmar are projected to grow the fastest in the next 5 years.  Both Philippines and Vietnam have seen increased use of ICT in manufacturing and services, leading to impressive growth in business and knowledge process outsourcing (BPO) in the Philippines and expansion of electronic manufacturing and software development in Vietnam. 
  • Unionization Trends in Asia  Since IndustriALL set foot in Asia in 2012, it has steadily expanded its influence in the region, acquiring 156 affiliates in 19 countries, with recent penetration in Cambodia and Nepal.  It continues to leverage the Rana Plaza tragedy in Bangladesh to champion workplace safety in South Asia and gender equality in the Philippines.  With the U.S. pulling out of the TPP (now called CPATPP - Comprehensive & Progressive Agreement for Trans-Pacific Partnership), the American Federation of Trade Unions can no longer influence the setting labor of standards for the 11 member countries (of which 7 are in Asia), creating an opportunity for IndustriALL to step in to set standards based on their priorities.
BEERG Report on Europe and Global Labor from Tom Hayes  Brexit continues to pose the single biggest problem for businesses located in the European Union (EU) for the simple reason that we still do not know what the end state of the process will be. 
Brexit Eighteen months after the UK voted to leave the EU, we are no wiser as to what exactly the UK wants by way of a long-term trading relationship with the EU to replace membership.  However, as of early January 2018, it looks like the two sides are edging towards a “transition arrangement,” which would effectively see the UK stay in the EU, to all intentsand purposes, until the end of 2020. This would mean that all EU laws would continue to apply in the UK until then.  While business will welcome the fact that it would have a three-year period to prepare for the “post-Brexit” era, the welcome will be tempered by the lack of certainty as to what will happen in the long term.  Within the next week BEERG will be publishing a detailed report, "Brexit: Taking Stock," a comprehensive examination of the Brexit process to date and how matters might evolve during 2018.  Our weekly BEERG Brexit Blog will continue to track developments as they occur.
  • Besides Brexit Brexit, however, is the least of the concerns of the EU.  Leaders such as Merkel and Macron are much more worried about the drift of Poland and Hungary towards authoritarian rule, while matters relating to the governance of the eurozone take priority over helping the UK resolve the problems it has created for itself.  When it comes to issues of concern to the human resource profession, three deserve attention:
  1. The General Data Protection Regulation (GDPR) becomes effective next May.  To say that it will impose new and more stringent obligations on business would be an understatement.  Get it wrong, and individual companies could be looking at fines of up to 4 percent or €20 million, whichever is the greater.  If they have not already done so, it is critical that companies become GDPR compliant as soon as possible.
  2. The European Commission plans to update the 1991 Written Statement Directive, which gives employees the right to receive, in writing, details of their employment contract from their employer.  To date, this has been a fairly straightforward matter of setting out rates of pay, overtime rates, holiday entitlement, etc.  But the Commission would like to use the revision of the Directive to create “new minimum standards to ensure that all workers, including those on atypical contracts, benefit from more predictability and clarity as regards their working conditions.”  Take this to mean that the exact nature of the employment relationship that “independent contractor/self-employed” workers have with Uber and other gig-economy businesses will come under critical scrutiny.  These relationships are already the subject of multiple court cases across Europe.  In late 2017, the European Court ruled that Uber was a transport company and not an IT platform, opening the door for Uber to be regulated as taxi company where this is not already the case.  We will be looking at these proposals in more detail in upcoming issues of the BEERG newsletter.
  3. In the first quarter of 2018, the Commission will publish a long-delayed report on the transposition of the 2009 European Works Council (EWC) Directive into national law.  The report itself is unlikely to say anything controversial and the unions will be disappointed that, as reports suggest, the Commission will not be proposing any further changes to the legislation at this time.  However, we understand that the Commission does intend to publish a paper on EWC practices designed to help the parties to EWCs to make them “more effective.”  We also understand that the Commission is concerned that around half of the companies within the scope of the EWC Directive still do not have EWCs in place and will be looking at ways to turn this around.  Companies who fall into this group, within scope but with no EWC, would be well advised to do some contingency planning
Over the past ten years we have drawn attention on more than one occasion to the difficulties companies have in managing labor relations in France.  This year the good news is that the Macron reforms, enacted in the latter half of 2017, are now coming into effect and, slowly but surely, are beginning to make a difference.  There is still a ways to go but France is no longer the labor relations black spot it once was.  For a useful insight into declining union strength in France click here.